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Friday, April 29, 2016

Venezuela Can’t Afford to Print More Money

The Dark Joke of Hyperinflation

From motorcycle parts, to flour, to fuel, to aspirin, we’ve been documenting the turmoil as Venezuela rapidly runs out of just about everything and spirals into economic collapse. But this week’s story of shortages surpasses them all.

Now Venezuela is running out of money. Actual money. As in banknotes. The country can no longer afford the pieces of paper which represent the money it doesn’t have.

Andrew Rosati from Bloomberg has the full remarkable story:

In a tale that highlights the chaos of unbridled inflation, Venezuela is scrambling to print new bills fast enough to keep up with the torrid pace of price increases. Most of the cash, like nearly everything else in the oil-exporting country, is imported.

And with hard currency reserves sinking to critically low levels, the central bank is doling out payments so slowly to foreign providers that they are foregoing further business.

There follows a tale fit for a spy movie: banknotes arriving by plane under the cover of darkness (it’s helicopter money, but not as we know it). In scenes familiar to those who experienced 2008 Zimbabwe and Germany circa 1923, Venezuelans now need wheelbarrows of cash to pay for basic food goods.

The situation is Venezuela is dire. The inflation rate is heading towards 500 percent, meaning that “Venezuela’s largest bill, the 100-bolivar note, today barely pays for a loose cigarette at a street kiosk”.

But the shortage of cash is probably not high on President Maduro’s to-do list. He is too busy covering up statistics about the spread of the Zika virus, using the rigged Supreme Court to hamstring the majority opposition in Congress, and calling all criticism of his government an international imperialist conspiracy.

Now is the time for Labour leader Jeremy Corbyn to take a break from refusing to condemn anti-Semitism in his party and make a stand against the injustices being committed in Venezuela in the name of socialism. Will he take this opportunity to denounce his “comrade” Maduro? Somehow, I doubt it.

This article first appeared at CapX.